Microeconomics Unit Review

"To stay competitive in the world market we must build a strong manufacturing base. We are targeting an 8% growth rate in real gross domestic product over the next five years. To achieve this, we will invest in building new mining and manufacturing facilities to increase production of coal, steel, and heavy machinery. We will redirect our country’s efforts so that we are no longer dependent on agriculture and the price of crops on the global market. The path forward may be difficult, but it will help our country maintain its strength and independence."

Does the president who gave this address lead a country with a command economy or a country with a market economy? What evidence indicates the type of economy?

• The president's emphasis on economic competitiveness indicates that the country has a market economy.

• The president’s focus on industrializing the country indicates that the country has a command economy.

• The global agricultural market’s effect on prices of the country’s goods indicates that the country has a market economy.

• The government’s power to directly target sectors of the economy indicates that the country has a command economy.

A company produces and markets an innovative bicycle that pedals and guides itself, using cameras to note its environment and prevent accidents. The bicycle is a success, leading other companies to enter the self-guiding bicycle market and offer similar products at the same price. Even with competitors entering the market, demand for these products remains high and many companies profit.

The market described in this passage is an example of

• a monopoly

• an oligopoly

• monopolistic competition

• pure competition

Heather is seeking to start a business. She is wanting to protect her assets and bring in other people to help her get started and hire people to run the business. What form of business organization should Heather set up?

• Kiosk

• Partnership

• Corporation

• Sole Proprietorship

The change seen in the graph would have been caused by

• a decrease in the price of resources

• a decrease in technology

• an increase in business taxes and regualtion

• an increase in the number of consumers

Which statement about the circular flow model is CORRECT?

• Businesses earn income from both the factor and product markets

• Households earn income from both the factor and product markets

• Households earn income from the product market and businesses earn revenue from the factor market

• Households earn income from the factor market and businesses earn revenue from the product market

To keep up with the growing costs of production, a company raises the prices of its goods. What will occur as a result?

• The company will make lower quality products

• The company will make higher quality products

• Consumers will purchase more of the company’s products

• Consumers will purchase less of the company’s products

Read the text and answer the question.

Charlie and Mack work at the same company. Charlie always shows up to work on time and ready to work. They are both hard workers, they work well with each other and other coworkers, and they always work hard and try to do the right thing. However, Mack frequently forgets to set an alarm and arrives to work late.

Which soft skill does Charlie exhibit that Mack does not?

• teamwork

• punctuality

• communication

• good character

Product differentiation is MOST important in which market structure?

• monopoly

• oligopoly

• monopolistic competition

• pure competition

Read the text and answer the question.

Company X and Company Y are two recently established businesses. Company X produces denim jeans and operates in a monopolistically competitive market. Company Y produces soybeans and operates in a purely competitive market.

Based on the information provided, which company has greater control over the price of the goods it produces?

• Company Y has greater control over the price of its goods than Company X. While Company Y can engage in non-price competition with other producers to increase demand for its soybeans, Company X produces a good for which there are many similar substitutes that consumers can buy instead.

• Company Y has greater control over the price of its goods than Company X. The large number of producers in the same market as Company Y indicates that its product is in high demand, while Company X must accept the market price for jeans because all producers of jeans produce identical goods.

• Company X has greater control over the price of its goods than Company Y. Company X is the only seller in its market and is able to set the price at which its jeans will be sold, while Company Y produces a good for which there are many similar substitutes that consumers can buy instead

• Company X has greater control over the price of its goods than Company Y. While Company X can engage in non-price competition with other producers to increase demand for its jeans, Company Y must accept the market price for soybeans because all producers of soybeans produce identical goods.

Which explains why a supply line is upward sloping?

• the Law of Demand states there is an indirect relationship between price and quantity

• the Law of Demand shows a positive relationship between two goods, creating the slope

• the Law of Supply compares marginal costs and marginal benefits in a constant rate

• the Law of Supply states there is a direct relationship between price and quantity